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The possibilities and limits of insurance as governance in insuring pandemics
Insurance can, as has clearly been indicated in the literature, play an important role in dealing with catastrophe risks, not only as a compensation mechanism but also as a mechanism to influence the behaviour of the insured. It is the concept known as ‘insurance as governance’. However, we argue th...
Autores principales: | , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
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Palgrave Macmillan UK
2023
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10028328/ https://www.ncbi.nlm.nih.gov/pubmed/37359231 http://dx.doi.org/10.1057/s41288-023-00291-z |
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author | He, Qihao Faure, Michael Liu, Chengwei |
author_facet | He, Qihao Faure, Michael Liu, Chengwei |
author_sort | He, Qihao |
collection | PubMed |
description | Insurance can, as has clearly been indicated in the literature, play an important role in dealing with catastrophe risks, not only as a compensation mechanism but also as a mechanism to influence the behaviour of the insured. It is the concept known as ‘insurance as governance’. However, we argue that there are limited possibilities for this role as far as the insurance of pandemics is concerned. The traditional technical tools, such as risk-based pricing, are difficult to apply. In addition, there may, ab initio, be serious problems in insuring pandemics within one of the main conditions of insurability (controlling moral hazard through an effective risk differentiation). One remedy that is traditionally applied, more particularly for natural catastrophes, is mandatory coverage. Furthermore, the capacity problem might potentially be solved through a multilayered approach in which, in addition to insurance and reinsurance, the government could also take up a role as reinsurer of last resort. That would also have the major advantage of stimulating market solution (and potentially providing incentives for the mitigation of damages), which clearly fails in a model where the government simply bails out operators. Finally, one important regulatory intervention is that insurers should be better informed than was apparently the case during the last pandemic about exactly which type of risks are covered and which are not. |
format | Online Article Text |
id | pubmed-10028328 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2023 |
publisher | Palgrave Macmillan UK |
record_format | MEDLINE/PubMed |
spelling | pubmed-100283282023-03-21 The possibilities and limits of insurance as governance in insuring pandemics He, Qihao Faure, Michael Liu, Chengwei Geneva Pap Risk Insur Issues Pract Article Insurance can, as has clearly been indicated in the literature, play an important role in dealing with catastrophe risks, not only as a compensation mechanism but also as a mechanism to influence the behaviour of the insured. It is the concept known as ‘insurance as governance’. However, we argue that there are limited possibilities for this role as far as the insurance of pandemics is concerned. The traditional technical tools, such as risk-based pricing, are difficult to apply. In addition, there may, ab initio, be serious problems in insuring pandemics within one of the main conditions of insurability (controlling moral hazard through an effective risk differentiation). One remedy that is traditionally applied, more particularly for natural catastrophes, is mandatory coverage. Furthermore, the capacity problem might potentially be solved through a multilayered approach in which, in addition to insurance and reinsurance, the government could also take up a role as reinsurer of last resort. That would also have the major advantage of stimulating market solution (and potentially providing incentives for the mitigation of damages), which clearly fails in a model where the government simply bails out operators. Finally, one important regulatory intervention is that insurers should be better informed than was apparently the case during the last pandemic about exactly which type of risks are covered and which are not. Palgrave Macmillan UK 2023-03-21 /pmc/articles/PMC10028328/ /pubmed/37359231 http://dx.doi.org/10.1057/s41288-023-00291-z Text en © The Author(s) 2023 https://creativecommons.org/licenses/by/4.0/Open AccessThis article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/ (https://creativecommons.org/licenses/by/4.0/) . |
spellingShingle | Article He, Qihao Faure, Michael Liu, Chengwei The possibilities and limits of insurance as governance in insuring pandemics |
title | The possibilities and limits of insurance as governance in insuring pandemics |
title_full | The possibilities and limits of insurance as governance in insuring pandemics |
title_fullStr | The possibilities and limits of insurance as governance in insuring pandemics |
title_full_unstemmed | The possibilities and limits of insurance as governance in insuring pandemics |
title_short | The possibilities and limits of insurance as governance in insuring pandemics |
title_sort | possibilities and limits of insurance as governance in insuring pandemics |
topic | Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10028328/ https://www.ncbi.nlm.nih.gov/pubmed/37359231 http://dx.doi.org/10.1057/s41288-023-00291-z |
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